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Monday, 18 June, 2001, 18:50 GMT 19:50 UK
Delisting may spell doom for Salon.com
Salon.com stock chart
Salon's stock has consistently traded below $1 since December, causing Nasdaq to delist it
By BBC News Online's North America Business Reporter, David Schepp

It is a sign of the times for the current state of online media.

Popular-culture internet site Salon.com, whose stock went public in 1999 amid much fanfare, now faces being delisted from the Nasdaq exchange, relegating it to the prospect of being traded as a "penny" stock.

Salon.com revenue chart
Profits fell at Salon during the first three months of the year, despite new offerings

It is a future that is bleak indeed.

The company, officially known as Salon Media Group, said it plans to appeal the Nasdaq's decision, made on 13 June, and also announced it is seeking shareholder approval for a "reverse" stock split.

A reverse split, which means stock holders would exchange their shares for a fewer number in the hopes of boosting the stock's share price, might allow Salon to maintain its Nasdaq listing.

But it rarely works, and at 28 cents a share, Salon's closing price on Friday, shareholders would have to trade at least four shares for every one they get back, just to nudge the per-share price above a buck.

Reverse stock splits are often viewed by analysts as a desperate move in the waning days of a company's existence.

"It's not a good thing," says Steven DeSanctis, who heads small stock research at Prudential Securities.

He adds that while there is no specific time line for how long a company may survive following a reverse stock split, it does not bode well for the company.

Online media slaughter

Salon.com is not the only online media company facing big money problems. Nearly every major online media site has announced cutbacks in staffing in the last year, including prominent sites such as the New York Times and the Wall Street Journal.

Most of the layoffs occurred last winter, with CNN.com announcing it would cut about 150 employees, while in February, CNBC.com and CNET, a popular tech-oriented publication, also laid off workers.

Last month, CBSMarketwatch, a popular financial news web site, said it intends to axe 15% of its workforce, and the New York Times has made more than 100 employees redundant since April.

For its part, Salon.com cut its staff by 25 last December, which some analysts believe is further eroding the ability of the site to appeal to readers.

Fewer employees means fewer writers. Fewer writers results in less unique material, which has been the appeal of many internet sites.

Subscription model

In April, Salon announced a new subscription service, for an annual fee of $30, for premium content, which offers "erotic art and photography", among other features.

It was a stab at the lucrative online pornography trade, which has been one of the few, consistent money makers for online companies.

Premium members also can view the site without having to encounter banner or "pop-up" ads, but choosing to switch them off.

But the new offering has failed to stem the slide in profits. For its fiscal fourth quarter, Salon reported revenue of $1 million, down 63% from the same period a year ago, despite a 168% increase in readers' ability to view ads.

Bumpy ride

Salon.com, launched in 1995, has seen its stock price fall from a high of about $14 a share, shortly after the stock was floated in 1999.

It has been downhill ever since, and shares of the beleaguered online magazine have consistently traded below $1 a share since last December, which has caused Nasdaq to call for the stock's delisting.

Among the requirements a company's stock must maintain for listing on the Nasdaq is a requirement that shares trade for at least $1 a share during a 30-day period.

The stock will continue to trade on the National Market, as the Nasdaq is also called, until a final determination is made by a panel composed of Nasdaq officials, who will oversee Salon's appeal for delisting.

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See also:

08 Jun 00 | Business
Salon.com plans cutbacks
31 Jan 01 | Business
Internet workers feel dot.carnage
15 May 01 | Business
Making money from financial news
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